The Two Big Reasons That Digital Transformations Fail (Harvard Business Review)

Plenty of cash is flowing into digital initiatives at large, industrial companies. In fact, the executives we surveyed recently at 1,350 of these businesses globally reported investments in digital reinvention totaling more than $100 billion between 2016 and 2018.

The problem is that the expected results often fail to materialize. Most of the leaders we surveyed (companies representing 17 countries and 13 industries) reported poor returns on their digital investments. The primary reason: unsuccessful efforts to scale digital innovations beyond early pilot work.

Take one sportswear brand that bet big on customization. This company spent heavily on robotics, machine learning, and 3-D printing at a new manufacturing plant. It wanted to give customers the option of ordering personalized athletic shoes and getting them fast. Leadership hoped for a win that would fuel transformation across its other manufacturing locations. But operations and new technologies never meshed, and rapid production proved to be illusory. After three years, the company shut down the facility.

What’s keeping companies from scaling pilots successfully? And what are the companies that are experiencing better returns on digital investments doing differently than the rest? To answer these questions, we asked the executives in our study to tell us in detail about their returns on digital investment (RODI). Then we looked at how well companies across our sample had scaled projects from the proof-of-concept stage. When we mapped those two critical parameters — higher-than-average returns and more successful scaling — we saw that 22%of our sample had demonstrated both.

We then dove deeper into that group to learn what they did differently. We focused on what survey respondents overall had identified as their top challenges and how companies in our leader group had dealt with them.

Two critical challenges — and their remedies — emerged from that analysis.

Challenge #1: Unspoken disagreement among top managers about goals

If top managers aren’t on the same page, it makes it difficult for their direct reports to agree on what to prioritize and how to measure progress. The remedy: Define and articulate not only the opportunity but also the problem it solves, and how the company will build the organization around the desired solution before investing.

A few years ago, Sorgenia, an Italian electricity and natural gas producer, launched a transformation project with a very clear goal: to increase its customer base from 300,000 to 1 million in only five years primarily by building and improving digital channels. (Full disclosure: Sorgenia is Accenture client; that relationship gave us additional insight into their work, helping us to share it here.) The company has no telesales people. Their leaders believe the future of sales is digital, and that with the right tools, they can simplify the customer experience and entice many new customers in the process.

Moving the company’s IT to the cloud was the critical organizational lever. The cloud solution enables the company to continuously manage the addition of significant numbers of customers.

But that shift involved all parts of Sorgenia’s core business, including customer acquisition and management, the analysis and management of big data through a new data hub, and the creation of a platform to improve employee communication, collaboration, and productivity. Without a clear understanding of the goal — and the means to the end — it would have been difficult to ensure that all elements of the business were on the same page.

The result: Sorgenia is well on the way to realizing its goal, and the journey is well supported. Many of the company’s key operations can now be performed 15% to 20% faster, and staff have been freed to concentrate on higher-value work.

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Harvard Business Review

18 October 2019

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